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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
( x ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ To ______________________
Commission file number 0-11997
CARRINGTON LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Texas 75-1435663
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2001 Walnut Hill Lane, Irving, Texas 75038
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(Address of principal executive offices and Zip Code)
972-518-1300
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(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days
Yes [ X ] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
The number of shares of the registrant's common stock outstanding as of
May 2, 2003 was 10,001,133.
INDEX
Page
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
at March 31,2003 (unaudited) and
December 31, 2002 3
Condensed Consolidated Statements of
Operations for the three months ended
March 31, 2003 and 2002 (unaudited) 4
Condensed Consolidated Statements
of Cash Flows for the three months
ended March 31, 2003 and 2002 (unaudited) 5
Notes to Condensed Consolidated Financial
Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of
Operations
Item 3. Quantitative and Qualitative Disclosures 12
About Market Risk
Item 4. Controls and Procedures. 12
Part II. OTHER INFORMATION
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share and per share amounts)
December 31, March 31,
2002 2003
------ ------
(unaudited)
ASSETS:
Current Assets:
Cash and cash equivalents $ 3,636 $ 2,354
Accounts receivable, net 2,370 3,205
Inventories, net 4,333 4,164
Prepaid expenses 542 876
------ ------
Total current assets 10,881 10,599
Property, plant and equipment, net 10,065 10,620
Customer relationships, net 954 903
Other assets, net 259 165
------ ------
Total assets $22,159 $22,287
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Line of credit $ 1,587 $ 1,587
Accounts payable 1,458 1,685
Accrued liabilities 1,256 926
Current portion of long-term debt and
capital lease obligations 730 868
Deferred revenue 1,922 1,933
------ ------
Total current liabilities 6,953 6,999
Long-term debt and capital lease obligations 1,517 1,865
Commitments and Contingencies
SHAREHOLDERS' EQUITY:
Common Stock 100 100
Capital in excess of par value 52,568 52,600
Accumulated deficit (38,976) (39,274)
Treasury stock at cost (3) (3)
------ ------
Total shareholders' equity 13,689 13,423
------ ------
Total liabilities and shareholders' equity $22,159 $22,287
====== ======
The accompanying notes are an integral part of these statements.
Condensed Consolidated Statements of Operations (unaudited)
(Dollar amounts and shares in 000's, except per share amounts)
Three Months Ended
March 31,
2002 2003
------ ------
Revenue:
Product sales, net $ 3,119 $ 6,287
Royalty income 617 617
------ ------
3,736 6,904
Cost of sales 2,591 4,337
------ ------
Gross margin 1,145 2,567
Expenses:
Selling, general and administrative 1,498 1,876
Research and development 379 207
Research and development-DelSite 304 711
Interest expense, net 6 71
------ ------
Net loss before income taxes (1,042) (298)
Provision for income taxes 0 0
------ ------
Net loss $(1,042) $ (298)
====== ======
Basic and diluted loss per share $ (0.11) $ (0.03)
Basic and diluted average shares outstanding 9,908 9,993
The accompanying notes are an integral part of these statements.
Condensed Consolidated Statements of Cash Flows
(Dollar amounts and shares in 000's, except per share amounts)
Three Months Ended
March 31,
2002 2003
------ ------
Cash flows used in operating activities
Net loss $(1,042) $ (298)
Adjustments to reconcile net loss to net cash
used in operating activities:
Provision for bad debts 7 15
Provision for inventory obsolescence 45 45
Depreciation and amortization 284 317
Changes in assets and liabilities:
Receivables 23 (850)
Inventories 240 124
Prepaid expenses (326) (333)
Other assets 14 94
Accounts payable and accrued liabilities (370) (128)
Deferred revenue 125 11
------ ------
Net used in operating activities (1,000) (1,003)
Cash flows used in investing activities:
Purchases of property, plant and equipment (105) (615)
------ ------
Net cash used in investing activities (105) (615)
Cash flows provided by financing activities:
Proceeds from debt issuance 0 500
Principal payments on debt and capital lease
obligation 0 (196)
Issuances of common stock 40 32
------ ------
Net cash provided by financing activities 40 336
------ ------
Net decrease in cash and cash equivalents (1,065) (1,282)
Cash and cash equivalents, beginning of period 3,454 3,636
------ ------
Cash and cash equivalents, end of period $ 2,389 $ 2,354
====== ======
Supplemental disclosure of cash flow information
Cash paid during the period for interest $ 15 $ 75
Cash paid during the period for federal,
state and local income taxes - -
Additional assets accounted for under capital
leases - 182
The accompanying notes are an integral part of these statements.
Notes to Condensed Consolidated Financial Statements (unaudited)
(1) Condensed Consolidated Financial Statements:
The condensed consolidated balance sheet as of March 31, 2003, the condensed
consolidated statements of operations for the three month periods ended
March 31, 2002 and 2003 and the condensed consolidated statements of cash
flows for the three month periods ended March 31, 2002 and 2003 have been
prepared by the Company without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. In the opinion of management,
all adjustments (which include all normal recurring adjustments) necessary
to present fairly the consolidated financial position, results of operations
and cash flows at March 31, 2003 and for all periods presented have been
made. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the Company's
annual report to shareholders on Form 10-K for the year ended December 31,
2002.
(2) Stock-Based Compensation:
The Company accounts for employee stock options in accordance with
Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock
Issued to Employees and Financial Accounting Standards Board Interpretation
No. 44, Accounting for Certain Transactions involving Stock Compensation, an
interpretation of APB Opinion No. 25. Under APB 25, the Company recognizes
no compensation expense related to employee or director stock options when
options are granted with exercise prices at the estimated fair value of the
stock on the date of grant, as determined by the Board of Directors.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 (FAS1 123), Accounting for Stock-
Based Compensation and Statement of Financial Accounting Standards No. 148
(FAS 148), Accounting for Stock-Based Compensation - Transition and
Disclosure - An Amendment of FASB Statement No. 123. Under the provisions
of FAS 123, pro forma compensation expense related to options issued to
employees is disclosed based on the fair value of options on the grant date.
The following table (in thousands) illustrates the effect on net loss if the
Company had applied the fair value recognition provision of FAS 123 to stock
based compensation:
----------------------------------------------------------------------------
Three Months Ended March 31,
2002 2003
----------------------------------------------------------------------------
Net loss (in thousands):
As reported $(1,042) $ (298)
Less: Stock-based compensation
expense determined under fair
value-based method (83) (85)
------ ------
Pro forma (1,125) (383)
Net loss per share:
As reported $ (0.11) $ (0.03)
Pro forma $ (0.11) $ (0.04)
----------------------------------------------------------------------------
Because options vest over a period of several years and additional awards
are generally made each year, the pro forma information presented above is
not necessarily indicative of the effects on reported or pro forma net
earnings or losses for future years.
The Company follows the provisions of FAS 123 and Emerging Issues Task Force
No. 96-19, Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring or in Connection with Selling Goods or Services, for
equity instruments granted to non-employees. The Company expenses the fair
value of these equity instruments over the respective vesting term.
(3) Earnings Per Share:
Basic earnings (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during
the period.
When the effects are not anti-dilutive, diluted earnings per common share is
computed by dividing net income by the weighted average number of shares
outstanding and the impact of all dilutive potential common shares,
primarily stock options. The dilutive impact of stock options is determined
by applying the "treasury stock" method.
(4) Concentration of Credit Risk:
Customers with significant receivable balances as of March 31, 2003, defined
as amounts in excess of ten percent (10%) of receivables included Mannatech,
Inc. ($1,318,000), Medline Industries ($684,000) and one other contract
manufacturing customer ($542,000) and of these amounts, $1,702,000 has been
collected as of May 12, 2003.
Customers with significant purchases for the first quarter 2003, defined as
amounts in excess of ten percent (10%) of revenues, were: Mannatech, Inc.
and Medline Industries, Inc. Mannatech, Inc. was the only customer with
purchases in excess of 10% of revenues for the first quarter 2002.
(5) Inventories:
The following summarizes the components of inventory in thousands:
December 31, March 31,
2002 2003
------ ------
Raw materials and supplies $ 1,776 $ 2,222
Work-in-process 624 470
Finished goods 1,933 1,472
------ ------
Total $ 4,333 $ 4,164
====== ======
The inventory balances are net of $632,000 and $661,000 of reserves for
obsolete and slow moving inventory at December 31, 2002 and March 31, 2003.
(6) Debt:
In March 2003, the Company received a loan of $500,000 from Bancredito, a
Costa Rica bank, with interest and principal to be repaid in monthly
installments over eight years. The interest rate on the loan is U.S. Prime
Rate plus 2.0%. The loan is secured by a mortgage on an unused, 164-acre
parcel of land owned by the Company in Costa Rica plus a lien on specified
oral patch production equipment. The proceeds of the loan will be used in
the Company's operations.
(7) Income Taxes:
The tax effects of temporary differences including net operating loss
carryforwards have given rise to net deferred tax assets. At December 31,
2002, and March 31, 2003, the Company provided a valuation allowance against
the entire deferred tax asset due to the uncertainty as to the realization
of the asset. At December 31, 2002, the Company had net operating loss
carryforwards of approximately $42,000,000 for federal income tax purposes,
which began expiring in 2003, and research and development tax credit
carryforwards of approximately $748,000, which began expiring in 2003, all
of which are available to offset federal income taxes due in future periods.
(8) Contingencies:
From time to time in the normal course of business, the Company is party
to various matters involving claims or possible litigation. Management
believes the ultimate resolution of these matters will not have a material
adverse effect on the Company's financial position or results of operations.
In December 2002, the Company entered into an agreement to acquire certain
assets of the Custom Division of Creative Beauty Innovations, Inc. ("CBI"),
including specialized manufacturing customer information, intellectual
property and equipment. CBI is a privately held manufacturer of skin and
cosmetic products with operations in Carrollton, Texas.
Under the agreement, Carrington paid CBI $1,001,000 and agreed (i) to
purchase inventory of CBI for an amount not greater than $700,000, to be
paid six months after closing and (ii) to pay CBI an amount equal to 9.0909%
of Carrington's net sales up to $6.6 million per year and 8.5% of
Carrington's net sales over $6.6 million per year of CBI products to CBI's
existing customers for the next five years.
(9) Reportable Segments:
The Company operates in two reportable segments: its Medical Services
Division, which sells human and veterinary products, and Caraloe, Inc., a
consumer products subsidiary, which sells bulk raw materials, consumer
beverages, and nutritional and skin care products, and also provides
services for the development and manufacture of nutritional, cosmetic and
medical products on a contract basis through its contract manufacturing
group.
Segments (in thousands)
Medical Caraloe,
Services Inc. Corporate Total
----------------------------------------------------------------------------
March 31, 2002
Revenues to unaffiliated
customers $ 2,335 $ 1,401 $ - $ 3,736
Loss before income taxes (207) (210) (625) (1,042)
Identifiable assets 11,084 1,506 7,380 19,970
Capital expenditures - - 105 105
Depreciation and amortization 160 - 124 284
March 31, 2003
Revenues to unaffiliated
customers $ 2,514 $ 4,390 $ - $ 6,904
Income (loss) before income taxes 13 649 (960) (298)
Identifiable assets 12,033 1,944 8,310 22,287
Capital expenditures - - 615 615
Depreciation and amortization 174 - 143 317
The Company evaluates performance and allocates resources based on profit or
loss from operations before income taxes.
Corporate losses before income taxes set forth in the following table
include research and development expenses, which were related to the
development of pharmaceutical products not associated with the reporting
segments. Assets which are used in more than one segment are reported in
the segment where the predominant use occurs. Corporate assets include all
cash and the Company's production facility in Costa Rica, which provides
bulk ingredients for both segments.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
BACKGROUND
The Company is a research-based biopharmaceutical, medical device, raw
materials and nutraceutical company engaged in the development,
manufacturing and marketing of naturally-derived, complex carbohydrates and
other natural product therapeutics for the treatment of major illnesses, the
dressing and management of wounds and nutritional supplements. The Company
is comprised of two business segments. See Note (9) to the unaudited
condensed consolidated financial statements for financial information
about these business segments. The Company sells, using a network of
distributors, prescription and nonprescription human and veterinary products
through its Medical Services Division, and consumer and bulk raw material
products and product development and manufacturing services through its
subsidiary, Caraloe, Inc. The Company's research and product portfolio are
based primarily on complex carbohydrates isolated from the Aloe vera L.
plant.
The Company's wholly-owned subsidiary, DelSite Biotechnologies, Inc.
("DelSite"), operates independently from the Company's research and
development program and is responsible for the research, development and
marketing of the Company's proprietary GelSiteTM technology for controlled
release and delivery of bioactive pharmaceutical ingredients.
LIQUIDITY AND CAPITAL RESOURCES
Cash at March 31, 2003 was $2,354,000 versus $3,636,000 at December 31,
2002. The decrease in cash was primarily due to the following operating
activities: operating losses for the quarter, increases in accounts
receivable balances arising from the increase in sales and an increase in
prepaid expenses arising from the timing of payments for certain inventory
items. In addition, the Company invested $615,000 in capital expenditures
to provide additional infrastructure for its operations and reduced debt and
capital lease obligations of $196,000. These cash uses were partially offset
by proceeds from debt issuance of $500,000 described below.
In February 2003, the Company entered into a 5-year agreement to lease
approximately 58,000 square feet of additional warehouse space located in
Irving, Texas.
The Company has a $3,000,000 line of credit with Comerica Bank-Texas
("Comerica") structured as a demand note without a stated maturity date and
with an interest rate equal to the Comerica prime rate. The line of credit
is collateralized by the Company's accounts receivable and inventory. This
credit facility is used for operating needs, as required. In October 2002,
the Company entered into a credit agreement with Comerica which further
defined the credit arrangement, including certain covenants. As of March
31, 2003, the Company was in compliance with all such covenants. As of
March 31, 2003, there was $1,587,000 outstanding on the credit line with
$512,000 credit available for operations.
Pursuant to the 2000 Distributor and License Agreement with Medline
Industries, Inc., ("Medline") the Company is to receive $12,500,000 in base
royalties over a five-year period ending November 30, 2005. In December
2002, the Company received an advance on future royalty payments due from
Medline of $2.0 million which was recorded in the Company's financial
statements as a loan to be repaid in quarterly installments through
September 2005. The Company is recognizing royalty income under this
agreement on a straight-line basis. At March 31, 2003 the Company had
received $1,933,000 more in royalties than it had recognized in income,
which is recorded as deferred revenue on the balance sheet. Royalties to be
received subsequent to March 31, 2003 total $4,750,000.
The Company is seeking approximately $1.0 million in additional financing to
be used as working capital in 2003 and 2004. The Company anticipates that
such borrowings, together with the expected cash flows from operations, will
provide the funds necessary to finance its current operations, including
expected levels of research and development. However, the Company does not
expect that its current cash resources will be sufficient to finance future
major clinical studies and costs of filing new drug applications necessary
to develop its products to their full commercial potential. Additional
funds, therefore, may need to be raised through equity offerings, additional
borrowings, licensing arrangements or other means, and there is no assurance
that the Company will be able to obtain such funds on satisfactory terms
when they are needed.
In March 2001, the Board of Directors authorized the Company to repurchase
up to one million shares of its outstanding Common Stock. The Company
believes it has the financial resources necessary to repurchase shares from
time to time pursuant to the Board's repurchase authorization. The company
did not repurchase any shares of its outstanding Common Stock during the
quarter ended March 31, 2003.
As a result of the current level of sales of raw materials produced at the
Company's processing facility in Costa Rica, the Company's demand for Aloe
vera L. leaves has exceeded and continues to exceed both the current and the
normal production capacity of its farm. It has therefore been necessary for
the Company to purchase Aloe vera L. leaves from other sources.
Since March 1998, the Company has been a minority investor in Aloe and Herbs
International, Inc., a Panamanian corporation ("Aloe & Herbs"), the owner of
Rancho Aloe (C.R.), S.A., a Costa Rican corporation, which produces Aloe
vera L. leaves and sells them to the Company at competitive, local market
rates.
RESULTS OF OPERATIONS
Quarter ended March 31, 2003 compared to quarter ended March 31, 2002
Total revenue during the quarter ended March 31, 2003 increased $3,168,000,
or 84.8%, to $6,904,000 as compared to $3,736,000 during the quarter ended
March 31, 2002. Caraloe revenue during the first quarter of 2003 increased
$2,989,000, or 213.3%, to $4,390,000 versus $1,401,000 for the same quarter
last year. The increase in Caraloe revenue is primarily attributable to
increased raw material sales of $1,807,000, increased specialty
manufacturing sales of $834,000 and sales of cosmetic products of $348,000
resulting from the acquisition of certain assets of the custom division of
CBI in December 2002.
Medical products revenue during the quarter ended March 31, 2003 increased
to $2,514,000 as compared to $2,335,000 during the quarter ended March 31,
2002.
Gross margin was $2,567,000 during the quarter ended March 31, 2003 as
compared to $1,145,000 during the quarter ended March 31, 2002, an increase
of $1,422,000. Gross margin as a percentage of revenue increased to 37.2%
during the first quarter of 2003 from 30.6% during the same quarter last
year. The increase in gross margin is attributable to a shift in the mix of
products sold toward higher margin raw material sales and increased plant
utilization which resulted in a decrease in unfavorable manufacturing
variances of $308,000.
Selling, general and administrative expenses during the quarter ended March
31, 2003 increased $378,000 to $1,876,000 as compared to $1,498,000 during
the quarter ended March 31, 2002 as a result of increased distribution and
marketing costs associated the acquisition of the custom division of CBI.
Product-support research and development during the quarter ended March 31,
2003 decreased $172,000 or 45.3% to $207,000 as compared to $379,000 during
the quarter ended March 31, 2002 as the Company continued to focus efforts
on product development in support of its manufacturing business. Research
and development for DelSite during the quarter ended March 31, 2003
increased $407,000 to $711,000 versus $304,000 during the quarter ended
March 31, 2002 as product development efforts for injectible and intranasal
delivery platforms continued and business development efforts increased.
Net interest expense during the quarter ended March 31, 2003 increased
$65,000 to $71,000 versus $6,000 during the quarter ended March 31, 2002 as
a result of increased debt balances.
Net loss for the first quarter of 2003 was $298,000 as compared to
$1,042,000 for the same quarter last year, a decrease of $744,000 primarily
due to volume-related increases in sales and gross margins. Loss per share
was for the first quarter 2003 was $0.03 compared to loss per share of $0.11
for the first quarter of 2002.
OTHER ITEMS
Governmental Regulation
The Company is subject to regulation by numerous governmental authorities in
the United States and other countries. Certain of the Company's proposed
products will require governmental approval prior to commercial use. The
approval process applicable to pharmaceutical products and therapeutic
agents usually takes several years and typically requires substantial
expenditures. The Company and any licensees may encounter significant
delays or excessive costs in their respective efforts to secure necessary
approvals. Future United States or foreign legislative or administrative
acts could also prevent or delay regulatory approval of the Company's or any
licensees' products. Failure to obtain requisite governmental approvals or
failure to obtain approvals of the scope requested could delay or preclude
the Company or any licensees from marketing their products, or could limit
the commercial use of the products, and thereby have a material adverse
effect on the Company's liquidity and financial condition.
Cautionary Statements for the Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act of 1995
Certain statements contained in this report are "forward-looking statement"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such statements are subject to risks, uncertainties and other factors,
which could cause actual results to differ materially from future results
expressed or implied by such forward-looking statements. Potential risks
and uncertainties include, but are not limited to the ability of the Company
and/or DelSite to obtain sufficient funds to finance DelSite's proposed
activities; the ability of DelSite to successfully exploit the Company's new
drug delivery technology; the adequacy of the Company's cash resources and
cash flow from operations to finance its current operations; and the
Company's intention, plan or ability to repurchase shares of its outstanding
Common Stock, the Company's ability to obtain the quantity or quality of raw
materials it needs and the impact of governmental regulations. For further
information about the risks, uncertainties and other factors that could
cause the Company's results to differ materially from the results indicated
by such forward-looking statements refer to the Company's Annual Report on
Form 10-K for the year ended December 31, 2002.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company's exposure to market risk from changes in foreign currency
exchange rates and the supply and prices of Aloe vera L. leaves has not
changed materially from its exposure at December 31, 2002, as described in
the Company's Annual Report on Form 10-K for the year then ended. See also,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Item 4. Controls and Procedures
Within 90 days prior to the filing date of this report, under the
supervision and with the participation of our management, including the
Chief Executive Officer and Chief Financial Officer, an evaluation was
performed of the effectiveness of the design and operation of our disclosure
controls and procedures. Based on this evaluation, our management,
including the Chief Executive Officer and Chief Financial Officer, concluded
that our disclosure controls and procedures are adequately designed to
ensure that the information that we are required to disclose in this report
has been accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding such required disclosure. There have been no
significant changes in our internal controls or in other factors that could
significantly affect those controls subsequent to the date of our last
evaluation and there were no corrective actions with regard to significant
deficiencies and material weaknesses.
Part II OTHER INFORMATION
Item 5. Other Information
In accordance with Section 10A(i)(2) of the Securities Exchange Act of 1934
(the "Act"), as added by Section 202 of the Sarbanes-Oxley Act of 2002, the
Company is responsible for disclosing any non-audit services approved by the
Company's Audit Committee (the "Committee") to be performed by Ernst & Young
LLP ("E&Y"), the Company's external auditor. Non-audit services are defined
in the Act as services other than those provided in connection with an audit
or a review of the financial statements of the Company. On May 7, 2003 the
Committee approved the engagement of E&Y to assist the Company in preparing
procedures for its evaluation of internal controls in compliance with
Section 404 of the Sarbanes-Oxley Act of 2002, with fees not to exceed
$15,000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
99.1 CEO Certification of SEC Reports Pursuant to 18 U.S.C.
Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 CFO Certification of SEC Reports Pursuant to 18 U.S.C.
Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the
quarter ended March 31, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARRINGTON LABORATORIES, INC.
(Registrant)
Date: May 14, 2003 By: /s/ Carlton E. Turner
-----------------------------
Carlton E. Turner,
President and
Chief Executive Officer
(principal executive officer)
Date: May 14, 2003 By: /s/ Robert W. Schnitzius
-----------------------------
Robert W. Schnitzius,
Vice President and
Chief Financial Officer
(principal financial and
accounting officer)
CERTIFICATION
I, Carlton E. Turner, President and Chief Executive Officer of
Carrington Laboratories, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Carrington
Laboratories, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date
of this quarterly report ("Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons fulfilling the
equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for
the registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: May 14, 2003 /s/ Carlton E. Turner
-------------------------------------
Carlton E. Turner,
President and Chief Executive Officer
(principal executive officer)
CERTIFICATION
I, Robert W. Schnitzius, Vice President and Chief Financial Officer of
Carrington Laboratories, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Carrington
Laboratories, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date
of this quarterly report ("Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons fulfilling the
equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for
the registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: May 14, 2003 /s/ Robert W. Schnitzius
--------------------------------------------
Robert W. Schnitzius
Vice President and
Chief Financial Officer
(principal financial and accounting officer)
INDEX TO EXHIBITS
Item Description
No.
99.1 CEO Certification of SEC Reports Pursuant to 18 U.S.C. Section
1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
99.2 CFO Certification of SEC Reports Pursuant to 18 U.S.C. Section
1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002